QuickBooks Tips Blog

Many small businesses use QuickBooks as their bookkeeping software. However, many "do it yourself" bookkeepers don't know QuickBooks as well as they should. Typically when we take on a new client the person responsible for the bookkeeping system is either the owner or another internal person. Sometimes these people have an understanding of accounting and GAAP but don't know how to properly set up and use QuickBooks. I wanted to give you six easy tips to improve your QuickBooks bookkeeping system.

Reconcile All Accounts That Have A Statement

I always stress the importance of reconciling QuickBooks accounts to clients, employees and our blog audience. In fact I think that reconciling your accounts is the most important step in the entire bookkeeping process. One common mistake I see often is not reconciling all of the accounts that can be reconciled. You can reconcile any account that has a beginning and ending balance. Any account that you get a monthly or quarterly statement on with a beginning and ending balance should be reconciled. This includes bank accounts, credit cards, loans and lines of credit. Reconciling all of your accounts on a regular basis is a huge step in the right direction. However, just because your accounts are reconciled does not guarantee that your accounting and financials are 100% accurate. Having a good understanding of the proper way to handle and code certain transactions is crucial.

Set Up And Use Ask My Accountant

You should set up and use the ask my accountant account in QuickBooks. Any transactions that you are unsure of how to properly handle should be booked to this account. Using the ask my accountant does several important things for your bookkeeping system. First, it allows you to reconcile, which is the most important step of the bookkeeping process. Many people get hung up on reconciling because they didn't know how to handle a certain transaction so they just didn't record it. Move any questionable transactions to ask my accountant, reconcile and move on. Another important reason to use ask my accountant is because it keeps all of your questions organized in one area of QuickBooks. This makes reviewing questionable transactions with your accountant fast and easy. Lastly, by tagging questions to ask my accountant you will be sure that everything gets put to the proper account.

Clean Up And Organize Your Chart Of Accounts Into Something Meaningful

Many small businesses over complicate their QuickBooks chart of accounts. I understand adding detail to your chart of accounts but too much detail can lead to reports that are complicated and meaningless. I always tell businesses to keep their chart of accounts as simple as possible, while still providing reports that are meaningful. QuickBooks users will often set up multiple accounts that could easily be combined. Examples include gas and fuel as separate accounts, as well as telephone and cellular. Identify those accounts that are duplicates on your chart of accounts and merge accounts in QuickBooks. This will help to keep your QuickBooks chart of accounts more organized, which will produce more meaningful financial reports.

Create A Set Of Memorized Financial Reports Just For You

You should develop a set of QuickBooks reports that are important to you as a business owner and run them on a regular basis. Maybe you have a different set of reports that you need to see on a weekly basis compared to your monthly or quarterly reports. You will start to customize QuickBooks reports and find some of the information very valuable; those are called QuickBooks aha moments. You should memorize QuickBooks reports that you regularly use and give them names that are meaningful to you. You should also organize them under memorized reports into a folder just for you. Using memorized reports and regularly looking at them will enable you to use your bookkeeping system as a tool to help run your business.

Clean Up AR And AP

After not reconciling the most common error I see in QuickBooks are incorrect balances in accounts payable and accounts receivable. Accounts receivable and accounts payable can quickly get out of hand for several reasons. The most common reason for invalid AR and AP is user error. Either money is not paid or received appropriately. As an example if you create an invoice in QuickBooks you then need to properly apply your customer's payment to that invoice. If instead you deposit the payment and code it to an income account instead of applying it to the open invoice you have not only overstated income but also left an incorrect balance in accounts receivable. The same thing can happen with accounts payable. If you enter a bill and a check is cut without applying it to the open bill you will overstate your expense as well as accounts payable. You should review your AR and AP aging summary often and research any old balances. It is easier to catch errors and keep your AR and AP clean if you are reviewing them on a regular basis.

Get All Of Your Accounts Into QuickBooks

Another common mistake I see is QuickBooks users not setting up all of their accounts in QuickBooks. People just love to leave a credit card, loan or bank account off of the books. Many people claim that the account is inactive or has very little activity. However, eventually you find out that the account does indeed have activity or a balance but it is omitted from QuickBooks. This is a costly error as you are providing your accountant with inaccurate information. The easiest way to find active accounts that are not included in the bookkeeping is to (yep you guessed it) reconcile. You will often find a payment to a random credit card or loan only to find out that the account in question is not set up on the QuickBooks chart of accounts. Identify all of your business accounts that need to be set up and get them on your books.

Taking these six simple steps will drastically improve your QuickBooks bookkeeping system. Not only will your books be more accurate but you will have peace of mind knowing that you are handling everything correctly. You will be able to use your bookkeeping system as a tool to help make key business decisions. Lastly, you will be handing your CPA accurate books at the end of the year in a timely manner. You won't be scrambling to get your taxes done and you should also spend less on tax preparation fees. If you need help setting up or maintaining QuickBooks feel free to reach out to us via the below link.

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Businessmen by trade, adventurers at heart; we understand the difficulties of running a small business and balancing a fulfilling life outside of work. We want to make the same thing easy for you. We offer day-to-day financial planning, personalized mentoring, and consulting services that will help you better understand the financial needs for your business and plan to meet your long-term goals.